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Government debt and economic growth: heterogeneity, asymmetries, and the role of net debt

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  • Gianni Carvelli
  • Carmine Trecroci

Abstract

Using data on 167 countries over 1970–2019, this study gathers new evidence about the government debt-growth relationship. We jointly address several features of the panel – foremost asymmetry, cointegration, endogeneity, country heterogeneity and cross-sectional dependence. We find that increases in per-worker debt are detrimental to the long-run dynamics of output, but our nonlinear estimates suggest that changes in government debt propagate their effects through different channels. Applying alternatively gross and net public debt as a measure of indebtedness yields different results too, as happens with the adoption of different estimators. The magnitude of the effects depends on the model specification, indicating that cross-country estimates of the debt-growth nexus require parsimonious interpretations.

Suggested Citation

  • Gianni Carvelli & Carmine Trecroci, 2025. "Government debt and economic growth: heterogeneity, asymmetries, and the role of net debt," Applied Economics, Taylor & Francis Journals, vol. 57(46), pages 7419-7437, October.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:46:p:7419-7437
    DOI: 10.1080/00036846.2024.2392052
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